Property Settlements: How are the entitlements determined

Date: Nov 15, 2009
Document Type: Article

In every financial settlement after the breakdown of marriage or de facto relationship, a four step mythology is used to determine the entitlements of each party. 

Step one involves determining the balance sheet.  In this process each party is required to make a full and frank disclosure of their financial circumstances. Any interest that each party has in real and personal property, whether held individually, jointly, or with a third person is included and then valued.  The liabilities of the parties are determined, together with what superannuation interests the parties have. Once all this has been identified and valued, then the total net value of the pool of assets is settled, and this is what there is for division.

The second step involves determining on a percentage basis for each party what their contributions have been. This is not a strictly mathematical exercise, because of the requirement to consider both the financial and non financial contributions of each of the parties. In every case this will involve taking a history from each party as to the various contributions towards the assets. The starting point will be looking at what assets each party brought into the relationship, and then tracing how parties got from that starting point to where they are at the current point in time.

The third step involves asking whether either party is entitled to an additional percentage for any reason. If so, it is then a question of what additional percentage of the net assets that party will be entitled to receive.

At the final step the percentages assessed at steps two and three are added to determine the overall percentage of the net assets each party will be entitled to receive. It is then a matter of determining how to allocate the net assets such that each party receives their percentage entitlement and that the assets and liabilities are no longer held in joint names. This may involve either a transfer of assets from one party to another or a sale of assets and the division of the net proceeds of sale.

What parties often do not understand or appreciate is they are not entitled to a wish list. If a division of the net assets is proposed, then the outcome ought to be justified having regard to the four step methodology. In other words, if a settlement proposal is made, then you need to be able to demonstrate an entitlement to that.

For assistance with Family Law matters, phone Dominic Wilson, Managing Partner of Craddock Murray Neumann, on (02) 82684000. We have Family Lawyers

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